Economy

7:42 am

Wed July 4, 2012

Chafee says the state should uphold its promises to investors

By PROVIDENCE, RI – Governor Lincoln Chafee says the state should uphold its promises to the investors who underwrote a 75 million dollar state loan guarantee for 38 Studios.

Some observers say Rhode Island should default on these so-called moral obligation bonds, since the state is not legally required to pay them.

But Chafee says he opposes the idea of defaulting on the moral obligation bonds, saying "We all made an obligation, as the words say - a moral obligation - we should fulfill that. It will have adverse ramifications for the state for years to come if we defaulted."

Conservative economist Josh Barro is among those who say Rhode Island should default on its moral obligation bonds. Barro says such a default would limit the state's ability to make foolish investments.

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